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by sburl
2533 days ago
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Unfortunately, a fully-featured unit is really expensive. For a unit like the ones we build (full bathroom with shower, kitchenette, on a full foundation) you'd be hard-pressed to build a unit for less than $100k. This number assumes you're spending a whole lot of your time working on the project. People are building these units and we're excited to see the stock of housing rise in the Bay Area but most people won't make the jump to borrow the money on a home equity line of credit and become a part-time construction manager. |
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Can we have a (minimal as you want) financial plan?
I mean, let's say that the building (by a professional contractor, with architect/engineers/whomever professional assistance, with all permits, etc., i.e. "turnkey") is going to cost to a "normal" person US$ 120,000 (or if you prefer 20% more than your $100K (which sounds to me appropriate, probably something in the 50-60 sqm or 500-600 sqm net surface).
Example of such an ADU:
https://crossconstruction.com/wp-content/uploads/2019/03/Des...
How much is the expected income (rent - taxes) per year? US$ 20,000 per year or 1,600 US$/month?
How much is the rate of the mortgage if you "simply" borrow the money from a bank? (let's say a minimal down payment of 10,000 and thus a loan of 110,000)
It should be (roughly) anything between 500 and 600 US$/month for a 30 years mortgage (fixed rate), let's make it 7,000 US$/year.
Besides the downpaynent of 10,000, at fixed prices (which is likely NOT the trend for rents in an area where people resorts to living in ADU's) you get 1,600 US$/month, spending 600, i.e. a net of 1,000 per month, so first year you get nothing (to compensate the down payment) and for the remaining 29 years it makes US$ 377,000 (29x(20,000-7,000).
With your formula, it is 30x10,000=300,000.
But - IF the rents ar going to increase in these 30 years - the difference will soon become huge.